UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 15993 / December 4, 1998
SECURITIES AND EXCHANGE COMMISSION v. THE BROWNSTONE GROUP, et
al., U.S.D.C., S.D.N.Y.
The Securities and Exchange Commission ("Commission")
announced that it filed a complaint on December 3, 1998, in
the United States District Court, Southern District of New
York, against The Brownstone Group a/k/a Brownstone
Holdings, Inc., ("Brownstone Holdings"), Brownstone Capital
Corp.("Brownstone Capital"), Blackstone Entertainment Group
and Gregory G. Cooper ("Cooper"). In its Complaint the
Commission alleges, among other things, that defendants are
engaging in fraudulent sales of Brownstone Holdings and
engaged in fraudulent sales of Blackstone Entertainment
stock, and are misusing the proceeds of those sales for
personal expenses and other improper purposes, including for
payments to and on behalf of Selene Alverio and Blackstone
Unisex, the relief defendants.
The Commission in its application asks the court to
temporarily and preliminarily enjoin the defendants from
committing the violations alleged in the Complaint, freeze
the defendants' and the relief defendants' assets, direct
each of the defendants and relief defendants to provide an
accounting, appoint a temporary receiver for the corporate
defendants, permit expedited discovery and prohibit the
destruction of documents.
The defendants named in the Complaint filed today in the
United States District Court for the Southern District of
New York, are:
Brownstone Group a/k/a Brownstone Holdings, Inc., a Nevada
corporation headquartered in New York City;
Brownstone Capital Corp., an Illinois corporation
headquartered in New York City which has been registered
with the Commission as a broker-dealer pursuant to Section
15(b) of the Securities Exchange Act of 1934 ("Exchange
Act"), since 1983;
Blackstone Entertainment Group, a Delaware corporation; and
Gregory G. Cooper, 31 years old, who lives in Yonkers, New
York and is the Chairman of each of the three Defendant
companies.
Named as relief defendants are:
Blackstone Unisex, a beauty salon in Bronx, New York that is
a d/b/a name registered to Cooper; and
Selene Alverio, Cooper's purported live-in girlfriend.
The Complaint and the Commission's other filings in
support of the emergency relief allege as follows:
Brownstone Capital and Cooper are currently engaging in a
fraudulent solicitation of investors by selling them shares
in a purported private placement offering for Brownstone
Holdings. Earlier private placement solicitations, for
Brownstone Holdings and for Blackstone Entertainment,
commencing in March and October 1997, respectively, were
fraudulent as well.
In each offering, a material portion of the proceeds of
the solicitations have not been used as represented in the
private placement memoranda. Instead of using the proceeds
raised from the three private placement offerings to develop
the businesses of Brownstone Capital and Blackstone
Entertainment, a substantial portion of the proceeds raised
have been used to fund other of Cooper's businesses or his
personal living expenses. Some of these proceeds were paid
on behalf of Blackstone Unisex, a hair salon controlled by
Cooper, and to and on behalf of Selene Alverio, his
girlfriend. Based upon a review of the bank records, it
appears that approximately $195,000 of the proceeds were
used to pay personal expenses, there were an additional
approximately $150,000 in automatic teller machine
withdrawals or debit card purchases, and approximately
$55,000 was paid on behalf of Blackstone Unisex. Cooper
directed registered representatives at Brownstone Capital to
solicit investors to purchase Brownstone Holdings and
Blackstone Entertainment stock. Certain of these registered
representatives told investors that the stock of the
companies being sold through the private placements would
soon go public and would double or triple in value in a
short period of time when they knew or were reckless in not
knowing that these representations were untrue.
In addition to the interim relief requested, the
Complaint seeks a permanent injunction against defendants
from violating the antifraud provisions in Sections 17(a) of
the Securities Act of 1933 ("Securities Act") and Section
10(b) of the Exchange Act and Rule 10b-5 thereunder; against
Brownstone Holdings and Brownstone Capital from violating
the registration provisions of Section 5(a) and 5(c) of the
Securities Act; and against Brownstone Capital, along with
Cooper and Brownstone Holdings as control persons, from
violating the antifraud and books and records provisions
applicable to broker-dealers, Sections 15(c), 17(a) and
17(b) of the Exchange Act, and Rules 10b-3, 15c1-2, 15c1-5
and 17a-4(j) thereunder. The Complaint also seeks to bar
Gregory Cooper from acting as an officer or director of any
issuer that has a class of securities registered under
Section 12 of the Exchange Act. Finally, the Complaint
seeks a final judgment ordering defendants and relief
defendants to disgorge their ill-gotten gains, together with
all prejudgment interest, and ordering defendants to pay
civil money penalties.
The litigation is pending.